France’s Court of Cassation Rules Noncompetition Clauses Spanning Two Continents Are Lawful

In a July 3, 2019, ruling, France’s Court of Cassation ruled that a noncompetition clause applying a restriction over two continents was lawful insofar as it did not prevent the employee from carrying out an activity in accordance with her training, knowledge, and professional experience (Cass soc., 3 July 2019, n° 18-16.134 (FS – D)).

The employment contract of a trainee manager provided for a noncompetition clause in Europe for six months. Following her transfer to Hong Kong, an amendment to her contract extended the clause to the Asia-Pacific region. According to the Court of Appeal of Paris, the noncompetition clause was invalid because its geographical scope was too broad, extending across two continents. Consequently, the clause unduly restricted the employee’s freedom of work.

However, the Court of Cassation reversed and annulled the judgment of the Court of Appeal on the grounds that a “vast” territorial scope of application does not in itself constitute grounds for invalidity. In fact, the Court of Cassation pointed out that the courts should have “examined whether the employee was unable to pursue an activity in accordance with their training, knowledge, and professional experience.”

A noncompetition clause is lawful when it meets four cumulative conditions:

• It is essential for the protection of the company’s legitimate interests.
• It is limited in time and location.
• It takes into account the specifics of the employee’s job.
• It includes an obligation for the employer to pay a financial contribution.

The second condition is the most frequently lacking since a geographical and temporal scope of application must be defined. The Court of Cassation has repeatedly clarified this condition. Its decision completes the case law on this subject, thus authorizing a noncompetition clause to extend to two continents, provided that the employee’s freedom to work is maintained.

However, for the noncompetition clause to be lawful, it must not unduly interfere with the free exercise of a professional activity. This decision reiterates the proportionality review to be carried out between the limits imposed by the noncompetition clause and its effects.

For instance, a clause whose scope proves to be broad by focusing on a whole continent (or more) may be valid in relation to other conditions of lawfulness, such as a short time limit or a significant financial compensation, since this does not lead to an excessive restriction on the freedom to work.

Written by Marie Millet-Taunay of Ogletree Deakins

© 2019 Ogletree, Deakins, Nash, Smoak & Stewart, P.C.